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Can you include family debt in an IVA?

One of the standard rules of an IVA is that all of your unsecured creditors should be included. This is to protect you. Debts left out can still take legal action against you. You will also need to find the money to continue paying them which will be a struggle.

As such if you owe money to a family member or friend it should really be added to your Arrangement. One benefit is you will not have to continue struggling to pay them. However as importantly they will be eligible to vote for your proposal. If they are on your side they are likely to agree. In some cases this could be the difference between it being accepted or rejected.

If you are including debt to a friend or family member they will need to be in a position to do without your payments for the years your IVA is in place. They may share in the money you pay into the Arrangement but what they received will be far less than what you should have been paying them.

Friends or family included in your IVA may not get a share of the money you pay in. As such they are mainly assisting to ensure the proposal is agreed.

Excluding family debt and continuing to pay it

Clearly it is not always possible to add friend and family debt to your IVA. You may not want them to find out about your debt problem. If so you have the option to leave them out. However you cannot count on being able to continue to pay them along side your IVA. It is very unlikely you will be able to afford this.

You are not allowed to include an amount to pay excluded unsecured debts in your living expenses budget. Doing so would reduce the amount you pay to your other creditors. They would be unlikely to agree to this and if asked would not accept your IVA.

That said once your living expenses budget is agreed, you can manage your money how you want as long as you maintain your IVA payment. You might therefore be able to make savings out of some of your agreed budgets and continue paying something to your family that way. However it will not be easy.

It is only really possible to exclude friends and family debt from your IVA if you understand you will not be able to to continue making payments to them.

Alternative options if you can’t stop paying friends and family

The friends or family you owe money to may be able and prepared to wait for their money. If so you should agree you will suspend repaying them until after your IVA has finished. You will then be free to pay them in full.

If they cannot wait then one option to explore is whether they could help you by implementing a debt management solution of their own. This can often help where someone is acting as a guarantor on your behalf.

Where it is simply not possible for you to stop paying them it is unlikely that you will be able to start an IVA. In this situation you may have to consider a debt management plan which is a more flexible solution.

If you simply have no option other than to continue paying your friends and family debt an IVA may not be for you. Contact us and we can discuss the options with you.

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2 thoughts on “Paying family debt in an IVA.”

My estranged husband is considering taking an IVA. He owes me a lot of money, and to assist him, Im willing to allow him to include me in the IVA , which will help get this passed with other creditors. Im allowing this for emotional personal reasons to help him move on with his life and wondered if this is allowed?

If your ex owes you money then there is absolutely no reason you cannot be included in his IVA as a creditor. As discussed in the article above, you may not get a share of the repayments he makes into the Arrangement but your agreement will certainly help it get accepted.

Just be aware you might be asked to show some kind of proof of the money owed. At the very least you will have to give a written statement confirming the amount but if you have anything like bank statements which prove you lent him money this would be useful.

Once his IVA is completed there is nothing to stop him then repaying you any outstanding balance he still owes. That would be between you and him.